Non-Qualified Deferred Compensation (NQDC) Plans

Qualified plans like 401(k)s are a helpful foundation—but they often fall short for high-earning employees and executives who max out contributions quickly or face unique planning needs. That’s where non-qualified deferred compensation (NQDC) plans come in.

At Feliciano Financial, we help employers and leadership teams understand the structure, trade-offs, and long-term impact of these flexible planning tools—so decisions aren’t made in a vacuum or based on tax myths.

What Is an NQDC Plan?

An NQDC plan allows select employees to defer a portion of their income beyond the limits of qualified retirement plans. The deferred compensation is often paid later—typically at retirement, termination, or a specified future date.

Unlike qualified plans, NQDCs:
– Don’t follow ERISA non-discrimination rules (you can limit participation)
– Have no IRS-mandated contribution limits
– Are subject to complex tax and timing rules under IRC Section 409A
– Are typically unfunded and backed only by the employer’s promise to pay

Why It Matters: The Hidden Gap for High Earners

Qualified plans have contribution ceilings that often leave top earners with a savings shortfall relative to their retirement goals. NQDC plans can help close that gap—but only when structured carefully.

Without a clear understanding of timing, vesting, and tax implications, an NQDC plan can create unintended consequences for both the employer and the participant.

That’s the Trust Gap: when important financial commitments are made without the full context they deserve.

Common Employer Uses of NQDC Plans

– Retain and reward executives with future income streams
– Customize vesting or performance-based incentives
– Provide supplemental retirement strategies when qualified plans aren’t enough
– Structure tax-deferred incentives in a way that supports long-term planning

What to Watch For

– 409A Compliance: Plans must meet strict timing and documentation rules
– Liquidity Risk: Employers must plan ahead for when deferred comp is paid
– Participant Communication: Lack of clarity can lead to distrust or missed opportunities
– Plan Portability: Benefits are not always transferable or guaranteed in the event of a business sale or insolvency

Let’s Bring Clarity to Complex Compensation

If your executive team is relying on spreadsheets, verbal promises, or outdated plan documents—you’re not alone. Many companies intend to reward key talent, but haven’t fully clarified the structure or risks involved.

That’s where we step in—to organize your current compensation strategy, simplify the decision points, and clarify how an NQDC plan may fit into your broader goals.

Let’s Talk It Through

Not sure if your plan is compliant, competitive, or even current?

We’re here to help you take a closer look—with structure, not sales pressure.

📞 Ready to feel the relief of a real plan?

Book a discovery call today—no pressure, just progress.

Schedule your discovery call at 903-533-8585